I don’t know if Stephenson is speaking out of cultural deafness or cynicism, but he’s obscuring the point: There is no subsidy. Carriers extend a loan that users pay back as part of the monthly service payment. Like any loan shark, the carrier likes its subscriber to stay indefinitely in debt, to always come back for more, for a new phone and its ever-revolving payments stream.
I was told as much by Verizon. In preparation for this Monday Note, I went to the Palo Alto Verizon store and asked if I could negotiate a lower monthly payment since Verizon doesn’t subsidize my iPhone (for which I had paid full price). Brian, the pit boss, gave me a definite, if not terribly friendly, answer: “No, you should have bought it from us, you would have paid much less (about $400 less) with a 2-year agreement.” My mistake. Verizon wants to be my loan shark.
In the meantime, AT&T has finally followed T-Mobile’s initiative and has unbundled the service cost from the handset. If you pay full price for your smartphone, an AT&T contract will cost you $15 less than with a subsidized phone on a 2-year agreement. This leads one to wonder how long Verizon can keep its current indifferent price structure.
All this leaves carriers with conflicted feelings: They like their iPhone salesman but, like short-sighted bosses who think their top earner makes too much money, they angle for ways to cut commissions down.
On the other side, Apple’s teams must be spending much energy finding ways to keep generating high monthly revenues for their “victims”.
[This system remains quite a mess. Almost as bad as the same folks supplying us our Internet connectivity….]